Rationale

The rating reaffirmation factors in the established position of Chambal Fertilisers & Chemicals Limited (CFCL) as a large urea manufacturer in the domestic market and a stable demand outlook for fertilisers, along with the company’s energy-efficient urea operations. The rating factors in the healthy operational performance of CFCL’s urea operations and the strong policy support for its Gadepan-3 (G-3) plant under the New Urea Investment Policy-2012 (NIP-2012), which contributes a major proportion to the overall profitability. The company has significantly ramped up its trading portfolio in YTD FY2026 with healthy revenue growth visible in crop protection chemicals (CPC) as well as bulk fertilisers i.e. DAP and NPK fertilisers. It has been able to garner healthy profitability in the CPC segment, supported by its wide distribution network and the introduction of new products. In bulk fertilisers, DAP sales volumes have grown at a healthy pace but have remained largely profit neutral as it was imported under the advantage/disadvantage scheme of the GoI. There has been a healthy ramp-up in the sales and profitability of NPKs in the bulk fertiliser segment with the products gaining acceptance among farmers amid lower DAP availability. The steady improvement in urea operations has been fuelled by the efficient energy consumption of the G-1 and G-2 plants post the energy savings capex incurred in recent years. However, in H1 FY2026, G-2 faced some operational issues and will be undergoing a shutdown in February 2026, resulting in lower production. Over the last few years, the subsidy payouts have been timely, which has resulted in a healthy liquidity build-up for the company. The company’s credit profile has strengthened over the last couple of years, driven by timely subsidy payouts by the GoI, robust EBITDA generation from the urea operations and a ramp-up of the non-subsidised business. The company posted an OPBDITA/PAT of Rs. 2,551 crore/Rs. 1,656 crore in FY2025 and Rs. 1,603 crore/Rs. 1,239 crore in H1 FY2026. The credit metrics remain strong with no bank debt outstanding as on March 31, 2025, and September 30, 2025 and TD/OPBDITA of 0.01x as on March 31.,2025 (debt includes lease liability) while the interest coverage ratio was robust. The liquidity position also remains strong with healthy free cash balances, no scheduled debt repayments and no large capex planned, apart from the TAN project which is also nearing completion. The company has also showcased exceptional financial flexibility while raising borrowings from the banking system as well as capital markets at highly competitive rates. While the promoters hold 60.85% shareholding out of which 23.68% is pledged as on September 2025 end, it has not resulted in any adverse impact on the company’s financial flexibility. The rating also factors in the vulnerability of CFCL’s performance to agro-climatic conditions and regulatory risks. The credit profile remains vulnerable to fertiliser subsidy budgeting by the GoI. ICRA notes that the company is in advanced stages of completing the capex programme for the technical ammonium nitrate (TAN) plant at its Gadepan facility. The entire capex of Rs. 1,645 crore is being funded by internal accruals, and the plant is expected to start commercial operations in April 2026. ICRA also notes that the 8-year period for the applicability of NIP-2012 for G-3 will get over in December 2026. The policy contours governing the G-3 unit post the expiry of the 8-year period and its impact on the credit profile will remain a key monitorable.